The Agriculture Department lowered its 2019 milk production estimate for the seventh month in a row in the latest World Agricultural Supply and Demand Estimates (WASDE) report, blaming slower-than-anticipated growth in milk per cow and lower expected cow numbers. The 2020 forecast was also reduced as higher anticipated feed costs are expected to weaken producer margins, limiting growth in the dairy cow herd and milk per cow next year.
    2019 production and marketings are now estimated at 218.2 and 217.2 billion pounds respectively, down 500 million pounds from last month’s estimate. If realized, 2019 production would be up just 600 million pounds or 0.3 percent from 2018.
    2020 production and marketings are estimated at 221.9 and 220.9 billion pounds respectively, down 800 million pounds on production from last month’s estimate and 700 million pounds lower on marketings. If realized, 2020 production would be up 3.7 billion pounds or 1.7 percent from 2019.
    The 2019 Class III milk price forecast was reduced on lower expected cheese and whey prices. It’s estimated to average $15.90 per hundredweight, down 15 cents from last month’s projection but would be $1.29 above the 2018 average and compares to $16.17 in 2017. The 2020 average is put at $16.65, up a dime from last month’s estimate and 75 cents above what is expected for 2019.
    The Class IV price forecast was raised on higher forecast butter and NDM prices. The 2019 average is expected at around $16.40, up 20 cents from last month’s projection and would be $2.17 above the 2018 average and compares with $15.16 in 2017. The 2020 Class IV average is now put at $16.85, up a nickel from a month ago and would be 45 cents above what’s expected for 2019.
    The WASDE’s 2019/20 U.S. corn outlook is for increased beginning stocks and imports, sharply lower production, reduced feed and residual use and exports, and smaller ending stocks. Beginning stocks are up reflecting a 100 million bushel decline in projected exports for 2018/19 to 2.2 billion bushels, based on current outstanding sales and reduced U.S. price competitiveness. Corn production for 2019/20 is forecast to decline 1.4 billion bushels to 13.7 billion, which if realized would be the lowest since 2015/16. The WASDE adds that “Unprecedented planting delays observed through early June are expected to prevent some plantings and reduce yields.”
    USDA will release its Acreage report on June 28, which will provide survey-based indications of planted and harvested area. With sharply lower supplies, use is projected to decline 425 million bushels to 14.3 billion, based on reductions to feed and residual use and exports. With supplies falling more than use, ending stocks are projected to decline 810 million bushels to 1.7 billion, which if realized would be the lowest since 2013/14. The season-average farm price was raised 50 cents to $3.80 per bushel.
    This month’s soybean supply and use projections include higher beginning and ending stocks. Beginning stocks were raised reflecting a 75 million bushel reduction in projected exports for 2018/19 based on lower-than-expected shipments in May and a lower import forecast for China. Adverse weather has significantly slowed soybean planting this year but area and production forecasts were unchanged with several weeks remaining in the planting season.
    With soybean use unchanged, 2019/20 ending stocks are projected at 1.045 billion bushels, down 25 million from the revised 2018/19 projection. Other changes for 2018/19 include increased soybean meal imports and exports, reduced soybean oil used for biodiesel production, and higher soybean oil ending stocks. The 2019/20 season-average price for soybeans is forecast at $8.25 per bushel, up 15 cents reflecting the impact of higher corn prices. Soybean meal prices are forecast at $295 per short ton, up $5.
    The latest Crop Progress report shows 83% of U.S. corn is in the ground, as of the week ending June 9, up from 67% the previous week, but 16% below a year ago and 16% behind the five year average. 62% of the corn has emerged, 31% behind a year ago and 31% behind the five year average. 59% of the crop is rated good to excellent, down from 77% a year ago.
    Farmers have 60% of the soybeans in the ground, up from 39% the previous week, 32% behind a year ago, and 28% below the five year average. 34% have emerged, down from 81% a year ago and 39% behind the five year average.
    The cotton crop is 75% planted, 13% behind a year ago, and 12% behind the five year average. 44% is rated good to excellent, down from 42% a year ago.
    Cash dairy prices seemed a bit confused the second week of June as record high heat hit the West Coast and traders anticipated the June 18 May Milk Production report. The Cheddar blocks hit $1.80 per pound Thursday, highest CME price since February 2017, but then retraced Friday, closing at $1.7825, still up 3 cents on the week, 18 3/4-cents above a year ago, and likely the highest priced cheese globally.
    The barrels finished at $1.6050, up 7 cents, 15 1/2-cents above a year ago, but a still too high 17 3/4-cents below the blocks. Trading amounted to 18 cars of block on the week at the CME and 28 of barrel.
    FC Stone’s Dave Kurzawski wrote in his June 11 Early Morning Update; “We’ve come to expect a wider spread this time of year as excess loads of milk, normally discounted milk, gets made into barrel cheese. To be sure, that same story has played out this year as well. But the story differs in that the US, and to some degree the world, is just not awash in milk as we’ve seen the past few years. We’ve seen a burst of barrel production over the past month or so courtesy of some otherwise concerning demand issues, weaker demand on Mozzarella in particular, not burdensome excesses of fresh milk. Because of this, we see the barrel market as nearing the tail end of this fire sale.”
    He adds that “Spring milk production is tighter than expected this time of year not because of weather, but because of economics. This dynamic, we believe, could become exacerbated with summer heat and higher feed costs.”
    Dairy Market News reports that cheese demand is moving in a positive direction, according to Midwestern cheese producers, particularly specialty cheese and curds. Some production schedules are at full-bore. Milk for cheese is available, “relatively,” and spot milk prices ranged from 50 cents over to $1 under Class.
    “As a bevy of dairy farmers have shuttered in the Midwest and elsewhere in the nation, cheesemakers say they notice those losses,” says DMN. “Health of the cheese markets is a concern to contacts in the region and elsewhere and, as the CME block to barrel price rift looms, contacts question whether block prices will abate, barrel prices will ascend, or a combination of both. Either way, contacts are leery of a price gap larger than a dime.”
    Stability is the order of the day in the western cheese market, according to DMN. “On one hand, downward price pressures on barrels were noticeable in the past week as customer preferences are moving from processed to natural cheese. On the other hand, block prices are increasing, causing a limitation in demand when prices are higher than $1.70.” Contacts claim the over 20 cent spread between blocks and barrels has a negative impact on the market. Block supplies are tighter than barrels, partly due to higher block exports at the beginning of the year. However, both have substantial stocks, though not overwhelming. Cheese output and sales are steady. Some of the trade concerns with Mexico have been lifted because the two countries reached agreements that avoided a trade war.
    Butter marched to $2.4050 per pound Tuesday but saw a Friday closing at $2.3650, down 3 1/4-cents on the week but 1 1/4-cents above a year ago, with a hefty 47 carloads exchanging hands.
    Midwestern butter supplies are a bit tight while demand is steadfast, according to DMN. Buyers are finding deals on bulk butter out West and suggest that availability there may keep butter markets from a full-on bullish push. That said, market prices are “brandishing their horns nonetheless,” says DMN.
    Western butter demand remains ahead of expectations. Contacts are seeing some seasonal slowdown but not to the extent they might see normally. Food service and bulk butter demand are especially strong for this time of the year. Butter makers say brokers keep looking for available deals but low-priced deals are scarce. Output is active and would be stronger if more cream was available.
    Grade A nonfat dry milk held at $1.0550 per pound for six consecutive sessions only to close Friday at $1.0525 per pound, a quarter-cent lower on the week but 26 1/2-cents above a year ago. There were 4 sales on the week.
    Spot dry whey finished a quarter-cent lower on the week, closing at 36 1/4-cents per pound, 4 3/4-cents below a year ago, with 4 cars sold on the week.
    Checking demand, HighGround Dairy (HGD) reports that while U.S. dairy export disappearance is down 14.3% year to date, “impressive March and April totals have pushed domestic year to date disappearance up 5.4%.” They state that “Disappearance dropped lower in nonfat dry milk, dry whey, and whey protein concentrate versus prior year, but all other commodities climbed higher.”
    “Total cheese disappearance continued higher in April for the third consecutive month, pushing year to date disappearance up 0.5% for the strongest start to the year on record. Butter disappearance marked the strongest start to a year since 2014, and total NFDM disappearance was down 8.5% but the April 2018 comparison was the strongest single month for nonfat dry milk disappearance since June 2012, lessening the overall market impact of the decline.”
    HGD adds that “Volatility continues to mark dry whey disappearance year to date, with total demand recovering versus the paltry March totals but remaining lower versus prior year for the fifth consecutive month.”
    From Washington; Agriculture Secretary Sonny Perdue announced that signup begins June 17 for the new Dairy Margin Coverage (DMC) program, what the USDA called “the cornerstone program of the dairy safety net that helps dairy producers manage the volatility of milk and feed prices.”
    The 2018 Farm Bill allowed USDA to construct the new DMC, which replaces the Margin Protection Program for Dairy and offers protection to dairy producers when the difference between the all-milk price and the average feed cost (the margin) falls below a certain dollar amount selected by the producer.
    The National Milk Producers Federation welcomed USDA’s announcement and praised the department’s inclusion of the cost of high-quality alfalfa feed in payment calculations, “a boon for dairy farmers facing a fifth year of low prices.”
    “The DMC provides a stronger safety net for America’s dairy producers, one sorely needed as low prices, trade disturbances and chaotic weather patterns combine to create hardships,” said Jim Mulhern, NMPF president and CEO. “We have advocated for months that margin calculations must consider the higher feed costs dairy producers pay to properly nourish their livestock.”
    In other news, NMPF, the U.S. Dairy Export Council, the International Dairy Foods Association, and more than 960 other groups representing the U.S. food and agriculture value chain called on Congress this week to quickly ratify the U.S.-Mexico-Canada Agreement (USMCA).
    A joint letter sent to representatives of top-producing dairy states detailed how the provisions of the USMCA “positively impact the U.S. dairy industry.” It states; “The timely resolution of ongoing trade disputes and negotiations is critical to growing the dairy sector’s international market share as well as maintaining credibility with U.S. trading partners. Therefore, the dairy community is asking Congress for immediate passage of this important trade agreement.”
    The organizations wrote: “On behalf of the dairy farms and businesses in your district, please pursue a USMCA vote without delay by working to resolve any outstanding issues as swiftly as possible and then quickly ratify the trade deal to send a clear message to the world that America still values fair trade and robust trade partnerships with our allies.”
    NMPF’s Jim Mulhern says “Solidifying and expanding trade opportunities abroad through USMCA will improve the prospects of dairy farms here at home. In the midst of uncertainty surrounding our trade relationships and yet another year of meager milk prices, the U.S. lost an average of seven dairy farms a day in 2018. The passage of USMCA will instill a renewed sense of optimism in our farmers.”
    “With approximately 16 percent of the U.S. milk supply exported annually, strengthening trading relationships and expanding international market opportunities is vital to the financial well-being of the U.S. dairy industry. USMCA preserves U.S. dairy sales to Mexico, the U.S. dairy industry’s largest foreign customer, while increasing market access in Canada and tackling nontariff barriers that can hinder exports.”
    The USDEC’s Tom Vilsack stated “The successful resolution of the Section 232 retaliatory tariffs helped pave the way for this critical trade agreement; while we work together to secure its passage Congress must also stand against the imposition of any additional tariffs that could jeopardize forward progress.”
    IDFA President and CEO, Michael Dykes, said, “USMCA meets the U.S. dairy industry’s top priorities to ensure a more level playing field, including preserving duty-free market access to Mexico, eliminating the unfair Canadian Class 7 pricing program and increasing market access to the Canadian market.”